Intel inks deals with Motorola Mobility, Lenovo to use new Atom chip in smartphones

For all of Intel‘s success in the personal computing market — its chips are in 80% of laptop and desktop PCs — the company has to date had little success breaking into the market for smaller, more mobile devices, including the holy grail of consumer gadgets: the smartphone. That could all change in the near future, as the company continues to develop the Atom chip (code-named Medfield). Never mind that the low-power Atom chip family, which is aimed squarely at the smartphone market, suffered a more than 50% decline in sales for the fourth quarter of 2011 compared to the same period a year ago. Intel maintains that the dip is temporary, and recent deals with Lenovo and Motorola Mobility would seem to bear that out.

At the 2012 International Consumer Electronics Show, Intel CEO Paul Otellini announced that Motorola Mobility would begin selling Intel-based smartphones in the second half of the year. Lenovo plans to start selling a smartphone based on the Atom processor in China during the second quarter. Otellini is using the Mobile World Congress show in Barcelona as a platform to unveil additional partnerships. (A follow-up blog post on Bizmology will provide more details on Intel’s newest alliances.)

To understand why Intel may finally be able to break into a market that has so far eluded it, you have to consider what is at stake. First, the smartphone market is big and getting bigger: IHS iSuppli estimates that sales in the mobile communications market will total nearly $400 billion in 2012, and that by 2015 smartphones will make up more than half of all cell phones sold (compared to about a third of phone sales in 2011). In addition, it is widely believed that mobile devices such as smartphones and tablets will dominate the market for consumer devices, eventually replacing personal computers. Those kind of numbers simply can’t be ignored if a company wants to continue to be a top tier supplier.

There are other factors that give Intel a better chance at success than it has ever had in the wireless market. After selling its mobile chip business in 2006, Intel bought the wireless chip division of Infineon Technologies in 2011. While representing only a small percentage of the global market for wireless chips, it gave Intel a portfolio of chips used in smartphones, including those used in Apple‘s iPhone. And with Google poised to buy Motorola Mobility, Intel will be on the line with another titan of industry not content to be put on hold.

Lesley Epperson covers the semiconductor and electronic component industries for Hoover's. After all those chips, she often needs to engage in a less esoteric pursuit: hunting down the perfect margarita.

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